Letter of Undertaking (LUT) Registration under GST

Letter of Undertaking is abbreviated as LUT. The Letter of Undertaking is a document submitted by the exporter in order to export goods or services without the payment of taxes. In case the LUT is not filed, the exporter may export by payment of IGST and then claim the refund of tax paid. Filing LUT is convenient than refund mode as the exporters do not wish to indulge into hassles of refunds and block their funds.

All registered taxpayers who export the goods or services will now have to furnish Letter of Undertaking (LUT) in GST RFD-11 form on the common portal of GSTN in order to make exports without payment of IGST. Letter of the undertaking has to be filed /submitted online before exporting the goods/services.

Hence, If you are engaged in Import Export business, then it would always be a great option to file an LUT for getting exemption from paying GST.

Objective of LUT

As per section 16 of the Integrated Goods and Service Tax Act, 2017 (“IGST Act”), Export of goods or services, i.e., zero-rated supply, does not come under the Goods and service Tax. Accordingly, in such case, exporters can claim refund through either of the following options:

• Option-1: The person may supply goods or services under bond or Letter of Undertaking (“LUT”) without payment of integrated tax and can claim refund of unutilised input tax credit.
• Option-2: The person may supply goods or services on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied. For the purpose of payment of GST on goods/services exported, exporters may utilise corresponding ITC claims.

Therefore, on filing of LUT, supplier may supply goods or services without payment of IGST subject to fulfilment of conditions given under GST law.

Eligibility for Filing LUT in GST

Who can use Letter of Undertaking (LUT)? Any registered taxpayer who is into exporting goods and services can make use of Letter of Undertaking. Any person who has been prosecuted for tax evasion for an amount of Rs. 250 lakh or above are ineligible.

The validity of such LUT's is for one year, and an exporter is required to furnish a fresh LUT for each financial year. If the conditions mentioned in the LUTs are not satisfied within the specified time limit, then the privileges will be revoked, and the exporter will have to furnish bonds. Other assesses should furnish bonds if the export is being made without the payment of IGST. LUTs / Bonds can be used for:

• Zero-rated supply to SEZ without payment of IGST
• Export of goods to a country outside India without the payment of IGST.
• Providing services to a client in a country outside India without paying IGST.

Benefits of filing LUT under GST

• Exports without tax payment
• Saves Working Capital
• An Entire Financial Year Validity
• Simple and online process

Documents Required for LUT under GST

• Copy of GST registration.
• Pan Card of the entity.
• KYC of authorised person/signatory.
• GST RFD 11 form.
• Copy of IEC code.
• Cancelled Cheque.
• Authorized letter.
• LUT cover letter -– duly signed by an authorised person.

Process of filing LUT on the GST portal

1. Login to GST Portal by using your valid Login Credentials.
2. Click on the menu bar and choose the option ‘Service’. Below the ‘Service’ option, select ‘User Service’ and then the tab “Furnishing Letter of Undertaking”. You will see the Form GST RFD-11.
3. Choose the fiscal year for which you want to provide the LUT or upload LUT of earlier duration by clicking on ‘Choose file’.
4. If LUT was previously provided offline, attach the document and submit your application.
5. Read the conditions in the Letter of Undertaking, select all three checkboxes.
6. Enter the name, address, and occupation of two witnesses.
7. Enter the location where the filing is done.
8. Select the Main Authorized signatory or any other Authorized signatory to sign the application form.
9. Preview the complete form by clicking ‘PREVIEW’.
10. Save the application form to recover later by clicking ‘SAVE’.
11. Sign and file with either EVC or DSC.

Once signed and submitted, the form cannot be edited, so recheck it carefully.

Specified time for acceptance of LUT

The Letter of Undertaking or Bond is mandatory for the purpose of export of goods or services without payment of GST including exports to SEZ units. Hence, accepting LUT has to be on top priority. The LUT must be accepted within three working days, once it has been received along with the self-declaration form of the exporter. If the officer fails to process the Letter of Undertaking within the next three working days, the exporter can consider it to be accepted.

Due date and validity of LUT

A fresh LUT should be filed for each new financial year. One LUT will be valid for one financial year. That means if you have filed an LUT for FY 2019-20, it would expire on 31st March, 2020. So for FY 2020-21, a Fresh LUT needs to be filed.

KEY THINGS TO REMEMBER

• NO bank guarantee required in case of Letter of Undertaking.
• The LUT must be duly applied and signed by the authorised signatory of the company, firm, etc.

Frequently Asked Questions

• Q. How do I get my LUT number to check my LUT submissions on the GST portal?
  Ans. Visit GST portal, log in using valid credentials, select Services, User Services, and View My Submitted LUTs.
• Q. How goods or services can be exported from India?
  Ans. Goods and services can be exported with or without payment of applicable GST. LUT is required for exports without tax payment.
• Q. Do I have a limitation to upload the previous LUT?
  Ans. Yes, only one LUT can be uploaded per application not exceeding 2 MB. For another LUT, file a new application.
• Q. How would I know about the completion of the process of furnishing LUT?
  Ans. System generates an acknowledgement and ARN number. You receive notifications via Email and SMS. Download PDF acknowledgement as record.
• Q. When is the Letter of Undertaking required to be filed?
  Ans. First time filing before exporting without taxes. For continuation into next financial year, file before the financial year starts.
• Q. Who is eligible for filing Letter Of Undertaking?
  Ans. Any exporter willing to export without paying the taxes can file Letter of Undertaking under GST online.
• Q. Whether the filling of bond is required for exporters?
  Ans. No, only online Letter of Undertaking is required for exports without tax payment.
• Q. How the Letter of Undertaking is required to be filed under GST?
  Ans. Since FY 2018-19, it is filed on GSTN portal using GST credentials. Undertaking is submitted online on duly stamped paper.
• Q. What is the validity of Letter of Undertaking filed?
  Ans. Valid for the whole financial year it is filed. Deemed withdrawn if export conditions are not fulfilled.
• Q. Whether the manual submission of LUT is required?
  Ans. No, ARN generated in Acknowledgment is deemed acceptance of LUT. No physical submission needed.
• Q. What if a Tax Official does not execute the LUT application?
  Ans. It will be deemed approved after 3 working days without action. Download order copy via Dashboard>Services>User Services>View Additional Notices/Orders.
• Q. Whether re-filing of LUT is required to continue the benefit?
  Ans. Yes, file LUT at the start of every financial year for continued benefit.
• Q. What are the various status of the LUT application filed by the taxpayer?
  Ans. Submitted, Pending for Clarification, Pending for Order, Approved, Rejected, Deemed Approved, Expired.
• Q. By whom the LUT in the GST application would be signed?
  Ans. Primary Authorized Signatory or any other Authorized Signatory using DSC or EVC.